Janes Defence Weekly

 

February 12, 2013

 

Title: Canadian defence production championed

Sub-title: A new report says that $240 billion in projected infrastructure, equipment and readiness procurement must be better spent – in Canada.

 

In a long-awaited report Tom Jenkins, a special advisor to Rona Ambrose, the country’s public works minister has recommended a sweeping revision of defence purchases, notably “developing original product domestically” and building “key industrial capabilities.”

 

The report titled Canada First: Leveraging Procurement Through Key Industrial Capabilities, released on February 12th, recommends channeling procurement to create industry clusters in six sectors. These include Arctic and marine security, command and support, cyber security, training systems and in-service support.

 

Like many countries Canada has long been struggling to balance defence procurement efficacy and development of domestic capabilities. To get best-of-breed solutions Ottawa often needs to look overseas to the UK and the US and others. This leaves local contractors little chance to build core strengths. Jenkins wants that to change.

 

That Canada’s defence procurement processes are in shambles is an open secret. Massive cost over-runs, incompetence and inefficiency in the country’s joint strike fighter program, the largest defence procurement ever, highlighted in an auditor general’s report last year, put the Conservative Harper Government under considerable pressure. A complete revision of JSF initiative was ordered, and alternatives are now being looked into.

 

One major institutional weakness Jenkins highlights is Canada’s offset and industrial and regional benefits policy. The existing structure often leads to high-tech imports, with local producers supplying risible accessories ranging from carpets, to tires, simple parts and general assembly.

 

For example a major shortfall of the JSF deal (and in increasing number of procurements) was the government’s neglect in hammering down offset requirements beforehand. As David Emerson, a former minister pointed out in a report of his own released late last year titled Beyond the Horizon: Canada’s Interest and Future in Aerospace, such an omission substantially reduces the procurement officials’ leverage when requirements are later spelled out.

 

The Jenkins report commends the steps taken in Canada’s recent award of a large shipbuilding procurement contract to force the winners (Irving Shipbuilding and Seaspan Industries) to show how they would foster domestic growth and innovation.

 

However the report also notes that “there is no evidence to substantiate that Canada has exercised a ‘design and build at home’ option over the last 50 years.” That needs to change the report says, noting that defence contractors should be required to demonstrate what they would so to help build Canadian capabilities, before they are awarded contracts.  

 

If the Jenkins recommendations are adopted, this would have a major effect on both European and US defence contractors. These have been falling over themselves to get into the Canadian market, to overcome the effects of budget cuts in their domestic economies. The projected changes will force them to finesse how they do that.

 

peter@peterdiekmeyer.com

 

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